Mortgages are often one of the biggest monthly expenses in any household budget.

But they shouldn’t leave you feeling like every dollar is already spoken for!

Your mortgage needs to work for your household budget.

While interest rates are an important part of that equation, there are other things to consider when deciding whether your mortgage is structured in a way that actually works for your day-to-day budget.

Let’s dive into the ways you can make your mortgage feel more manageable.

Signs Your Mortgage Isn’t Working For You

One of the biggest warning signs that things aren’t working well is when your mortgage makes it feel difficult to manage the rest of your finances.

That could mean your repayments leave very little room for unexpected expenses, or you are regularly relying on a credit card to get through to payday. But it could also be something less drastic than that. Perhaps:

• Your repayments don’t line up with when you get paid
• You have underutilised savings
• You don’t have ready access to an emergency fund
• Your fixed mortgage doesn’t give you any flexibility to make additional repayments
• Your floating portion is larger than it needs to be
• Your repayments are manageable now, but you are worried they may become unaffordable if interest rates increased.
• Your financial circumstances have changed since you originally arranged your mortgage

None of these things necessarily mean you have the wrong mortgage. But they could be signs that it is time to take another look at your options.

What Can You Do About A Problematic Mortgage?

The good news is that there are always options. Your mortgage does not have to be a one-and-done transaction. You can review it at any time to see if there are things you can do to make it less problematic for your household budget.

These are some of the options:

1: Consider your repayment frequency

Changing from monthly to fortnightly repayments can help some families manage their cash flow more effectively. This is especially true if you line your repayments up with your pay cycle.

Selecting a payment frequency isn’t about getting the repayments as low as possible; it’s about finding a schedule that naturally works with the way your household income arrives and your expenses are paid.

2: Think about fixed and floating

Fixing your entire mortgage provides payment certainty, but it can also limit your flexibility. Having a portion of your mortgage on a floating rate can give you more freedom to make extra repayments or access funds.

It is important to remember that floating rates are generally higher than fixed rates, so this option may not be suitable for everyone. But for some families, splitting between fixed and floating portions can give you a useful balance between certainty and flexibility.

3: Could an offset account help?

If you have regular funds sitting in a savings account, an offset mortgage could potentially help reduce the amount of interest you pay.

Instead of your savings simply sitting in a separate account, an offset arrangement can link eligible accounts to your mortgage, meaning you may only pay interest on the difference between your mortgage balance and the money you have available in those accounts.

This can be particularly useful for keeping your emergency funds accessible, but still reducing the amount of interest that is calculated on your mortgage.

4: Review Your Mortgage Term

Your lender will have issued a date for when your mortgage funds need to be repaid by. But this date is not necessarily set in stone; depending on your age and circumstances, you may be able to change that end date.

Extending the term can reduce your repayments and potentially ease your monthly cash flow, while shortening it can help you pay the loan down faster when your budget allows. Either can be good options depending on your circumstances.

5: Don’t Forget Your Emergency Fund

Paying every spare dollar into your mortgage might look like a good option. But what would happen if you had an unexpected expense pop up?

A broken-down vehicle, an urgent home repair, or a change in income can quickly put pressure on the household budget. Keeping an emergency fund can give you a financial buffer and reduce the need for expensive forms of credit when something goes wrong.

The amount of money each family would need in an emergency fund varies, but a good estimate is three months’ worth of expenses.

Help Is Always Available

There is not one mortgage structure that works for every household budget.

Your ideal setup will depend on your income, expenses, financial goals, tolerance for risk, and your plans for the future. A structure that works brilliantly for one household might be completely unsuitable for another.

That’s where an experienced mortgage adviser can help you.

Rather than simply looking at the interest rate, we look at the bigger picture. We explore how your mortgage fits with your household budget, when your fixed terms expire, whether splitting your lending could help, and whether an offset account would work for your family.

We can also review your mortgage should your circumstances change. A pay rise, new family member, career change, renovation, or an updated financial goal can all be good reasons to revisit your structure.

Is Your Mortgage Helping Or Hindering Your Budget?

Your mortgage should be more than just a repayment that you suffer through each month. It should be something that fits into your wider financial life.

If you are constantly feeling squeezed by your repayments, or you are simply wondering whether your current structure is the right fit for you, it is time for a mortgage review.

At Mortgage Suite, our friendly team can look at your individual circumstances and help you understand the options that are available to you.

Get in touch with us today and let’s make sure your mortgage is working with your budget, not against it.